Brazil is a crucial destination for investment as regards the Chinese strategy of securing enormous supplies of natural resources for developmental needs. In the first half of 2010, Brazil had about $20 billion worth of foreign direct investment inflows from China. That marked an increase of over ten times when compared to preceding Chinese FDI inflows into Latin America’s fastest growing and biggest economy.

Subsequently, the first 2010 half investments of China into Brazil might as well put the Asian Tiger as the top foreign investor into Brazil this year, an improvement from its previous position last year in which China came 29th. Currently, foreign investments from China can be witnessed in infrastructural projects such as the building of the port on the Atlantic coastline, about 175 miles north of Rio de Janeiro state.

The two mile port is aimed at accommodating huge Chinese vessels that will transport iron ore for China’s steel industry that is experiencing a dramatic increase in demand as the country grows and expands economically. It is expected that most of the infrastructural investments in the project, inclusive of the factories such as a steel mill, shipyards, an automobile plant, plants for the manufacture of oil and gas equipment; all will be undertaken by the Chinese at massive investment costs.

The new investment will result in a “factory city” for which most of the plants will be investments by the Chinese. Other than infrastructural development projects, Chinese companies have as well invested heavily in Brazil’s electric power supply business with the purchase of stakes in the country’s power grid to power their steel mills, car plants and telecommunications infrastructure.

Additionally, some Chinese grain firms are keen to buy land in Brazil for the production of soybeans. It is speculated that some firms are seeking land as vast as 600,000 acres of Brazilian outback. China’s foreign direct investments into Brazil are increasing by the day and it remains to be seen how the shifting alliances will play out, as developing nations look to China, as opposed to the US for development.

Capital Dynamics is a Swiss company that offers advise to private equity investors and has thus far, advised funds summing up to over $21 billion under its management. The company reported Thursday it will commence its Sao Paolo operations with an office to be headed by its Vice President, Filipe Cerqueira Caldas. Currently, the Swiss company has seven other offices and expects that its new operations will enable it get co-investment and clean energy investment opportunities, in addition to building links with other domestic fund managers.

The Latin American market has attracted interest from many funds such as the May investment by UK based Apax Partners with the acquisition of a 54.2% stake in Tivit Terceirizacao de Tecnologia e Servicos. The $485 million investment in the Brazilian Stock Exchange Listed information technology and outsourcing Services Company marked Apax entry into the Latin American market.

In the meantime, co-founder and managing director, The Carlyle Group, David Rubenstein said emerging markets like Brazil’s are currently very attractive areas for private equity investments, with Advent International concluding its fifth fund worth $1.65 billion in Latin America in April, marking the Continent’s biggest fund to date.  At the same time, reports surfaced that an American buyout company, Warburg Pincus plans to re-introduce its presence in the country with an office opening in Sao Paolo. The company closed its Brazilian operations office in unknown circumstances.

Capital Dynamics Head of the new Brazilian Sao Paolo office, Caldas said the office is proof of the company’s growth expectations, reiterating the company’s confident nature on Latin America’s vast opportunities, coupled with its commitment to the continent. He said that the office, together with its domestic investment professionals in the country will enable the company recognize and expand domestic business networks.

In April, the Latin America Venture Capital Association (LAVCA) reported in a survey that private equity and venture capital investment in the continent fell less in 2009 when compared to other global markets. According to LAVCA, Latin American investments peaked at $3.3 billion in 2009, a 29% fall from 2008, whereas fundraising fell 43% to $3.6 billion.

The announcement for the July 14th tender was made by Brazilian president Luiz Inacio Lula da Silva at a ceremony yesterday. Even so, the tender will be officially published in the country’s gazette on July 14th, today, together with additional information on the government agency’s official site, the spokesman added yesterday. 

As such, the tender was today published and bid envelopes are expected to be submitted by the 29th of November 2010, with the tender to be subsequently awarded on 6th of December this year as well, ANTT director, Bernardo Figueiredo said.

The tender entails the construction of a 511 km railroad, which includes 90.9 km of tunnels and 103 km of bridges and overpasses. It is expected that the bullet train will operate at speeds of about 300 km/h to 350km/hr. Thus, the concession will be given to the bid that provides the lowest passenger fare and requires the least amount of public financing.

On the other hand, the Brazilian agency has set the fare for a one way ticket between Rio de Janeiro and Sao Paolo, an economy class ticket, at about 150 reals to 200 reals. The bid has attracted infrastructure giant companies from around the globe with companies from Germany, Spain, France, China, Japan and Italy showing particular keenness for the tender.

The mega infrastructure development project is expected to have approximate gross operating revenue of 193 billion reals in the project’s 40 year concession time frame. The Brazilian state owned investment financier, BNDES, will fund about 70% of the investment’s cost.

However, the concessions for the major infrastructural development project are still being undertaken before being put out to tender, even though it is pegged at the 40 years time frame.  BNDES, the financier of more than half of the capital, is a Brazilian state owned Development Company that offers funds for projects within the country in addition to its key role in the privation programs undertaken by the Brazilian government; with an annual 2008 funding that topped 90.9 billion reals, representing a 40% growth when compared to the year 2007.

The Rio de Janeiro-Sao Paulo-Campinas bullet train project is in line with other similar major investment projects in road concessions, oil and gas amongst others that BNDES has funded.

Based in New York, the International Law firm has had a long stint in Latin America and its portfolio includes a full range of legal services inclusive of mergers and acquisitions, project finance, private equity, corporate finance, venture capital and emerging companies, commercial and products liability litigation amongst a host of other services. According to the announcement, the new Sao Paolo office operations will commence as soon the investment gets approval from the Brazilian Bar. The details of the amount paid for the property were not however disclosed.

The investment is expected to get stamping over the coming few weeks, with the two new experts expected to bring in extensive expertise on structural finance, cross border finance, trade and securitization transaction operations in the country. Chadbourne partners said the success and development of the firm’s Latin American business, together with Brazil’s burgeoning importance in the global economy, had motivated their move, terming it “decisive,” and adding that it is aimed at enabling the firm gain further capabilities in the country.

They further reiterated their expectation that the country’s focus and strong international finance experience will help strengthen the firm’s capabilities given the fact that it has been active in the Brazilian market for 15 years. However, the firm vowed to push on with steps to reinvigorate its place as a predominant legal firm in the Brazilian market.

The new Sao Paolo office makes the American firm the second New York based firm to have operations in Brazil and Mexico, Latin America’s two biggest economies. The firm’s expertise in international finance and project finance together with its long presence in the region is expected to offer it a platform to serve its customers and expand considerably. The firm’s new office in Brazil will be multi-disciplinary, but will bias on cross border mergers and acquisitions, international bank finance, project finance, capital markets, private equity and international arbitration.

The company has twelve partners in Brazil and is one of the few American law firms ranked by Chambers Latin America for its services across multiple disciplines. The firm has other global operations in Mexico City, London, Moscow, Poland, Dubai and Beijing

Pieter Jacobus Vader, BHG’s president, said the new investment acquisition comes as part of the group’s strategic plan that seeks investments in large urban areas, with a bias on business travel. With Cuiaba currently one of Brazil’s top agribusiness centers, on top of its proximity to some of Brazil’s major tourist destinations for example the Pantanal and Chapada dos Guimaraes, and its host status for the 2014 world cup to be held in the country, BHG hopes to increase its presence in the region considerably.
The acquired property is made up of 6,630m², 104 rooms, two conference rooms, two meeting rooms, a business center restaurant amongst other amenities, and the investment deal includes a 640m² parking lot the hotel might likely use for expansion. The property will fly the Golden Tulip flag, which has a 4-star standard. With the acquisition of this new hotel, BHG further strengthens its position as the country’s third-largest hotel company.

The Brazil Hospitality Group is amongst the country’s biggest group hotels and manages 32 hotels, out of which 16 are the groups and the rest are managed for other investors. BHG begun from the merger of Invest Tur Brasil and Latin America Hotels (LAHotels) last year in February and had consolidated by end of year. BHG has another exclusive deal with Golden Tulip Hospitality Group in South America through its brand names, Royal Tulip and Tulip Inn.  In just 18 months of operations, LAHotels has become the third largest hotel company in Brazil.
BHG has for long been keen on investment opportunities in management, acquisition or the construction of hotels, particularly in Brazil’s major capital cities. The group’s acquisitions in 2009, December fomented its position as an equal amongst Brazil’s largest hotel chains.

The group made two investment acquisitions in December last year, taking up Hoteis Albert International, in Porto Alegre (Rio Grande do Sul) and the purchase of shares in the four-star Condominio do Edificio Beira Mar, in Salvador (Bahia). LAHotels aims at acquiring and managing hotels or companies that own hotel assets in Brazil and in other countries in Latin America. BHG (BHGR3) shares are traded on the Sao Paulo Stock Exchange (Bovespa).

In exchange for the Brazilian Company’s quotas, the Canadian firm issued 1,500,000 common shares in its capital and 750,000 non transferrable share purchase warrants to Do Sonho Quotaholders with each warrant holder being entitled to acquire an additional common share in Stronghold’s capital at a price of $0.75 per common share till June 16^th, 2012. However, the Canadian firm’s warrants issued to Do Sonho Qoutaholders are subject to a four month and one day hold period that will expire on October 17^th, 2010.

Do Sonho is a privately owned Brazilian company that has mining rights to five mineral concessions and is currently in the process of being transferred title to an additional mineral concession. Cumulatively thus, the six concessions make up the Tucuma Property that consists of a total of 11,500 hectares and is found in the Brazilian state of Para.

The Canadian mining company is expected to pay US$3 million upon the launch of commercial primary ore production, minus alluvial minerals, from the Tucuma Property to Do Sonho Quotaholders on a pro rata basis to their quotaholdings in Do Sonho and further spare a 1% Net Smelter Return royalty to the Do Sonho Quotaholders on a pro rata basis. Stronghold Metals Inc. President and CEO, Yannis Tsitos, said the company was very excited to have concluded the deal for the purchase of the Brazilian Do Sonho investment.

According to him, historical, geophysical and geochemical data including historical scouting drilling results from the Tucuma Property indicate high quality gold and copper-gold targets exist untested or partly tested in the Do Sonho held concessions. The Canadian firm has already begun preparations for the expected drill program and said it would offer more details on the first phase of the planned drill soon.

Historically, the Tucuma Property has produced significant quantities of gold from small-scale mining by artisanal miners (garimpeiros). The Tucuma Property represents an excellent opportunity to explore for both shear-hosted economic gold vein mineralization and for a copper-gold system of the IOCG type, with drill ready targets. Part of the Tucuma Property has been previously explored by High-grade Ventures, Brasilca Mining, a Teck-Inco joint venture and Codelco.

HCL’s burgeoning existence in Brazil has been helped by rapid economic growth, expansion of conglomerates in the market and the growing internationalization of Brazilian corporations. In this investment, the company announced that it intends to construct a multilingual service desk aimed at supporting its global as well as local customers in Rio Grande do Sul, to service its customers in Portuguese.

The facility is expected to offer global support for telecom and mainframe clients, specialize in help-desk support for monitoring network and providing data center services as well as information security. Just in its first “birthday” since beginning its Brazilian operations; HCL currently employs more than 150 individuals that cater for its global and local customers through its state-of-the-art delivery center in Sao Leopoldo and its office in Sao Paolo.

HCL vice president (Emerging Geographies),  Sandeep Kalra, said that, with the global economy recovering, companies in the country are encountering new growth opportunities and might be required to decide upon strategic investments in IT to enable them get their new products and services to the market.

He acknowledged Brazil’s crucial role in the global economy given the size of its economy, the second biggest in the Americas. As such, Brazilian IT firms seeking to build global IT organizations might consider leveraging the expertise on IT infrastructure management from HCL. It currently boasts large number multi-national corporations as customers, in addition to other local companies in Brazil in its infrastructure services segment.

According to the company, it is more affordable to deliver its services from Brazil than it is from the US, UK and Europe. However, it remarked that, regardless, its Indian operations were better with a cost advantage pegged at a 30 to 40% cheaper cost service charge. HCL provides services in Portuguese and Spanish to some of its global clients such as Readers Digest and Nokia. The company’s entry into Brazil was part of its quest for expansion in the Latin American market.

The company will allocate £130 million to capital expenditure in the coming year, a rise of £70 million from the previous expenditure, including a 50% increase in spending on new stores. As such, the group plans to invest in 20 to 30 wholly owned stores this year with emphasis on Latin America and Brasilia has been targeted for some investments. The company recently opened its first store in the Brazilian capital and this, according to its CEO, was its start in the region.

The first store opened in Brasilia will be followed by an additional four stores in other parts of the country. Brasilia is particularly ideal for the company as a new market opportunity and in line with its cluster strategy, would increase stores in the region and other investments in other emerging new markets as well and the rolling out of new concepts stores too.  

The CEO announced the intended expansion plans as the company made a pre tax profit of £166 million compared to a loss of £16 million last year on sales that rose 6% to £1.28 billion.  The company attributed most of its losses in 2009 to £116 million of impairment charges it took from its Spanish operations. However, the venture into the Brasilia and other emerging markets in Latin America is expected to yield good returns for the company.

Burberry shares rose upwards by 46½p to 659p.Its retail division that operates its Burberry-branded stores and concessions was the only segment that witnessed underlying revenue growth with sales up 15% to £749 million in the year or an equivalent of 7% in like-for-like terms.  Even so, the Brasilia investment came with the closing of the company’s nine stores and the opening of 21 more others. With the retail segment accounting for most of its business, about 58% of all its sales, it remains to be seen how its foray into the Brasilia market will play out both in the short and long term investment periods.

The land will be used to grow 50% eucalyptus, elephant grass and other tree species exclusive to that specific area’s ecosystem.  During the production process, the elephant grass, churned into small bits will be put into the boiler whereas the timber logs will go whole to save on energy. Other residues from the forests like twigs and branches will be cut into small pieces before burning.

Coomex plans to go into 60MW of installed capacity in a government planned tender for capacity that is expected in five years time. This investment therefore, will give the company enough time to renew its forests and make the first cut, expected to take place after four years while the elephant grass will be harvested after six months. Large industrial consumers will benefit from the remaining 30% that will be sold on the free market.  

As a result of its approach to the investment, the company could decide to cut down on the amount of trees it turns to wood chips and instead sell it to paper and the wood industry.  Similar Biomass investments in Brazil have always burned sugar cane residues bought under half the price compared to wood chips at US$13.4 per tone. The merit is, wood powered plants run all year round as opposed to the sugar cane based ones that are only operational in the harvest season.

According to the company, the Bahia biomas investment is one in many that will be rolled out in the future. Company President announced plans to launch other plants in Bahia, Tocantins and Minas Gerais to increase the overall output to 450-500MW. It is developing 10 other small hydro plants totaling 11MW in combined capacity in Sao Paulo, Parana, Rio de Janeiro and Minas Gerais. 

Coomex acquired 12% stake in the 30MW Barra dos Coqueiros wind project that sold electricity during last December’s government organized tender for power contracts and has another 17% stake in another similar company that will take part in a similar government organized tendering for renewable energy in August.

Belo Horizonte is the capital city of the Minas Gerais state located in the southeastern region of Brazil and the third largest metropolitan area the country. According to IBGE, 2008, about 5,054,000 people resided in the metropolitan area of the city with a population density of 7,290.8 inhabitants per km².Belo Horizonte is the sixth most populous city in Brazil and its metropolitan area is the third most populous in Brazil. The population is evenly spread amongst different races with Amerindians being the least and whites the majority, amongst others.  

As Brazil’s main economic hub, the city receives many visitors thus wields influence on other states. Multinationals and local Brazilian companies have headquarters in the city. Google and Oi have headquarters in Belo Horizonte, a city whose service sector plays a key role in its economy with about 85% contribution to its GDP and the other Industries making up about 15% of GDP contributions. The city’s GDP as at 2006 stood at R$ 32,725,361,000 while the GDP of its metropolitan area was R$ 62,329,388,000 and the per capita income for the city was R$15,830 in 2007.

The city has a well developed industrial sector and has distinguished itself as Brazil’s siderurgical and metallurgical hub due to its rich mineral resources particularly iron ore.  Canadian Queensland Engineering Company, Austin Engineering signed an investment deal in April, a joint venture business partnership in which the company committed US$15 million over the next two years in the city. The deal was a venture with Delp Engenharia, a company that supplies engineering services to the resource sector in Belo Horizonte.

Additionally, a cooperation agreement between the University of Queensland and the Federal University of Minas Gerais, a state research agency was signed with a backing of US$2 million commitment towards new research, especially water research. The investment deals with the Canadian government focused on mining, education, training and research sharing.

The huge revenues from mining, a robust and thriving industry sector in the region have been possible thanks to fair government policies and regulations on mining. The Brazilian mining regulation as contained in the constitution ensures isonomy, that is, equality of fiscal and economic treatment before law for all companies in mining sector regardless of the origin of their capital. This has subsequently opened doors for foreign investments in exploration and mining and the disclosure of vital information in the sector that an investor easily gets if they need.